By Laura Wagner
The problems with the Russell Simmons’ financial company, RushCard, started Oct.12, when a software upgrade in the transaction processing system caused many accounts to show a zero balance or left customers unable to access to their funds. Rob Latour/Rob Latour/Invision/AP hide caption
itoggle caption Rob Latour/Rob Latour/Invision/AP
Weeks after hundreds of thousands of RushCard customers were unable to access their money due to what the company called a technical glitch, the federal Consumer Financial Protection Bureau has stepped in to “ensure a comprehensive response” to the situation.
“The CFPB is taking direct action to get to the bottom of this situation that may have harmed thousands of innocent consumers already.” Director Richard Cordray said in a statement Friday. “The CFPB has also engaged in discussions with fellow regulators, including the Office of the Comptroller of the Currency and the Federal Trade Commission, to ensure a comprehensive response that addresses the situation quickly and holds accountable all of the parties involved to make consumers whole.”
While RushCard, a financial company owned by hip hop mogul Russell Simmons, has said nearly all of the problems with its prepaid debit cards are resolved, there are still some customers who say they are having trouble.
Racquel Hudson, 27, of Chicago said she went nearly two weeks without being able to access her money before her account regained full function on Wednesday. She said her husband was still not able to access his account.
Hudson, who works as a care manager assistant for Advocate Medical Group, said she was working hard to make ends meet.
“I’m squeezing the little money I have saved from my last paycheck, but that’s not even enough to pay off my bills. If I pay off my bills I’m gonna be broke,” she said Wednesday. Then what am I gonna do?”
Many of RushCard’s customers are what the finance industry calls “underbanked” or “unbanked,” meaning they do not have enough money to sustain a checking account, as The Atlantic‘s Gillian White explained on All Things Considered:
“They don’t have the necessary credit to keep up a credit line,” White told NPR’s Audie Cornish. “Prepaid cards kind of fill that role where you can have money direct deposited onto it. You can load money yourself, and then you can use it in places where a debit card — in this case, a Visa card — would be accepted.”
Hudson says she is considering taking legal action.
“I’ve put in a complaint in with the FDIC. And the Consumer Financial [Protection Bureau] and I’m to the point where I want to take legal action,” she said. “That’s my next step, trying to find an attorney for a situation like this.”
The CFPB is also considering its next steps. CFPB spokesman David Mayorga said one possibility is a lawsuit.
He declined to comment on whether the fact that many of of RushCard’s customers are poor and likely do not have the resources to pursue legal action on their own would influence the bureau’s decision to pursue punitive action against the company.
Mayorga did say, however, that there is a CFPB proposal under consideration that would ban consumer financial companies from using certain arbitration clauses that protect them from customers’ class-action lawsuits. As it stands, many financial companies, including RushCard, contractually prohibit customers from joining together to sue in groups.
“Consumers should not be asked to sign away their legal rights when they open a bank account or credit card,” Cordray said in an Oct. 7 statement. “Companies are using the arbitration clause as a free pass to sidestep the courts and avoid accountability for wrongdoing. The proposals under consideration would ban arbitration clauses that block group lawsuits so that consumers can take companies to court to seek the relief they deserve.”
The proposal was in the works before this month’s RushCard debacle, and is still under review.
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